Connecticut Lenders Leaping Toward The Forefront In Foreclosures

State Lenders Leaping Toward Forefront In Foreclosures

Four years ago, Connecticut had one of the lowest rates of foreclosure in the country.

Today, only residents of Oklahoma, Massachusetts and New Jersey lose their homes to foreclosure more often than Connecticut residents.

Those stark statistics, in a recent survey of lenders conducted by the Mortgage Bankers Association of America, illustrate just how deeply the recession has hurt state homeowners.

FOR THE RECORD - The ratio of Connecticut loans in foreclosure to total loans is 159 for every 10,000. The ratio was incorrect in a story and caption on Page 1 Monday's usiness Weekly.

The foreclosure rate in Connecticut is now eight times greater than it was just four years ago, according to the survey. For every 1,000 home loans, there were 159 in some stage of foreclosure this summer, nearly double the figure at the same time a year ago, when just 86 of every 1,000 loans were in foreclosure.

Nationally, only 104 of every thousand loans are in foreclosure, according to the survey.

For thousands of state homeowners, foreclosure remains a stark possibility. Banks continue to be swamped with property they must maintain and try to sell in a depressed real estate market. And the foreclosed houses add to the number of homes on the market, driving prices down further.

Legislators now are saying that the continued problems in residential real estate are likely to prompt the introduction of some type of foreclosure-relief legislation next year.

The chief causes of the growth in foreclosure rates in the state today are plummeting real estate values and job losses unprecedented in Connecticut since the Great Depression. But real estate analysts, homeowners and bankers say the problem is being exacerbated by other, less obvious factors.

Financially strapped homeowners such as Ronald Dumond and Axel Reuter blame a residential credit crunch that they say makes it

impossible to refinance their homes and make lower monthly payments that would help see them through rough times and keep their homes.

State lenders concede that many homeowners are finding it more difficult to sell or refinance their way out of economic problems, but cite forces such as federal regulatory oversight on lending practices that restrict access to credit.

Thomas Hylinski, vice president of People's Bank, one of the largest mortgage lenders in the state, says banks are working more today with delinquent borrowers to avoid foreclosure than they were two years ago. He says the problem is stabilizing, with fewer loans at People's listed as 90 days or more past due.

But Hylinski says there are more loans in foreclosure than ever before. In fact, one reason foreclosure numbers are up, he says, is that many lenders might have delayed starting foreclosure action because they hoped the economy would improve and eliminate the need to take control of homes.

That hope has diminished, he said.

"Today, the malaise is recognized as a long-term thing," Hylinski said. "And there is only so long you can carry a bad loan before you have to take the house." And statistics in the mortgage bankers' survey suggest that the explanations for the high rate of foreclosures might be more complicated than just increased layoffs or timid lenders.

Even though the foreclosure rate in the state is high, Connecticut homeowners fall behind on their mortgage payments less frequently than homeowners in the rest of the country.

The overall delinquency rate on all mortgages, though rising, still remains below the national average of 4.49 percent. As of this summer, 3.55 percent of all Connecticut mortgage loans are delinquent 30 days or more. Four years ago, 2.76 percent of loans were delinquent.

This means that in 1988, for instance, for every 14 delinquencies there was only one loan in foreclosure. Today, that ratio is closer to two delinquencies to one foreclosure.

"It is a puzzle," said Robert Rosenblatt, an economist with the national mortgage bankers association.

Historically, foreclosure rates are tied to declining home prices, low personal-income growth and dwindling home sales, factors that all exist in recession-racked Connecticut, Rosenblatt says. But he added that usually an increase in foreclosures is preceded by a corresponding jump in mortgage delinquencies, which has not occurred in the state.

Real estate experts and lenders cite a variety of reasons for the seemingly contradictory numbers. Some say Connecticut's court system is clogged with foreclosure cases, which tend to inflate survey numbers. Others say shoddy lending practices during the 1980s put mortgages in the hands of people who were at high risk for failure, even in a booming market.

And some say the severity and length of the recession has prompted people to simply leave the state and walk away from mortgage payments and their homes.

For homeowners such as Dumond and Reuter, the problem is clear. They insist that the state is undergoing a residential credit crunch as severe as that affecting state businesses.

Both Dumond and Reuter lost jobs in the past year, but they are also luckier than many homeowners who have lost their homes. They both have working spouses, good credit histories, and tens of